Afren Plc’s board of directors has decided to put the company into administration after the company failed to secure support for a refinancing and restructuring plan.
Afren's recently completed operational review has led the company to expect materially lower near-term production from its assets as compared to the production level assumed in the restructuring plan announced on June 19. This change is due to a number of timing and pricing assumptions, as well as to some delays in project implementation during the period when initial funding was being finalized.
While the overall capacity of the assets to deliver field life production remains broadly unchanged, the near-term deferral of production revenues has undermined the immediate liquidity position of the business. The company has subsequently engaged in detailed discussions with all its stakeholders, including lending banks, bondholders, and partners, to discuss the impact of the revised assumptions on Afren Plc’s near-term cash flow, funding requirements, and the resulting amendments in the terms of the restructuring which are required to deliver the revised business plan.
The board believes that all the possible routes have now been explored during the course of this process, which was subject to a strict timetable, driven by Afren Plc’s short-term liquidity issues. These discussions have failed to deliver support for a revised refinancing and restructuring proposal that would result in Afren Plc being able to pay its debts as they fall due. As a result, the board has taken steps to put Afren Plc into administration and appoint Simon Appell, Daniel Imison, and Catherine Williamson of AlixPartners as administrators.
The appointment is made with the consent of the company’s secured creditors and is seen by those secured creditors as an important step in preserving value in the company’s subsidiaries. No other company in the Afren Group has appointed administrators today or taken any other step to begin insolvency proceedings. The Group is in discussions with its partners and other key stakeholders with a view to continuing its operating businesses.